a. Rich Industries and Very-Big Corp are two monopolists operating in separate markets. At their profit-maximizing prices, Rich has a marginal cost of 5, while Very-Big has a marginal cost of 10. Assume that the firms are not capacity constrained.

We can conclude that:

a) Rich is charging a higher price than Very-Big is charging.

b) Rich is charging a lower price than Very-Big is charging.

c) Rich's marginal revenue is higher than Very-Big's marginal revenue.

d) Rich's marginal revenue is lower than Very-Big's marginal revenue.

b. A monopolist has constant marginal cost c, and the inverse demand for the monopolist's product is P = a - bQ. A design change raises all consumers' willingness to pay by 2.00 (a vertical shift up in the demand curve) while increasing the marginal cost of production by 2.00. (Assume the monopolist is not capacity constrained before or after the change.)

The (profit maximising) monopolist should:

a) raise price and keep output the same.

b) keep price the same and raise output.

c) raise both price and output.

d) keep both price and output the same.